Self-liquidation refers to investments that can offset the expenses incurred to acquire the asset, generating regular income and profits. Examples include toll buildings, real estate, and currency trading. Proper evaluation of investment opportunities is crucial for success.
Self-liquidation is a term used to describe any investment in which the stocks, bonds, property, or other holdings purchased have the inherent ability to offset the expenses incurred to acquire the asset. In many cases, self-liquidating assets can turn a profit after creating enough of a return to cover that initial expense. There are several examples of this type of investment activity, ranging from municipal projects to real estate.
An example of a self-liquidating asset would be the construction of a toll building or bridge for use in a city or town. Because the building could be leased to tenants and generate regular income, it has the inherent ability to pay the full cost of the original construction project. Likewise, the toll bridge would eventually generate enough revenue to offset the initial investment. From then on, both projects could be self-sustaining and even earn additional profits that could be used to finance other municipal projects.
The same basic concept applies in terms of residential real estate. An individual might purchase a home with the intent to lease the property and create a monthly stream of income. Assuming a suitable tenant is found, the property begins to generate regular income. Over time, that income makes up for the initial investment made by the owner and begins to generate ongoing profits.
Self-liquidating income can be earned by participating in various types of investment markets, such as the foreign exchange market. Savvy investors could identify a trend involving a particular coin and earn enough of a return to pay for the original purchase and make a profit as well. For example, the currency investor might buy a given currency while it is relatively weak, hold it until it strengthens, and then sell it at a substantial profit on the original investment.
Engaging in self-liquidating financial deals requires the buyer to have a good sense of what will continue to be a desirable asset, or what will ultimately become worthless for that initial investment. Without this ability to properly evaluate an investment opportunity and know how to take advantage of it to the best advantage, any attempt to secure property or other investments and turn a profit will likely fail. For this reason, investors tend to take a close look at all relevant investment-related factors, such as past performance and future potential, before choosing to buy the company.
Smart Asset.
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